In today’s article, we will discuss the importance of two separate documents required for residential real estate owners.
Certificate of Occupancy
The first document is the Certificate of Occupancy. Most municipalities in the State of New Jersey require landowners to obtain a new Certificate of Occupancy each time a new tenant moves. The checks that accompany an application for a certificate of occupancy vary by municipality. All cities will check smoke detectors, and if gas heaters are in place, they will also have carbon monoxide detectors checked. Some cities will also carry out more rigorous inspections in an effort to improve the quality of housing across the city. It should be noted that municipalities are no longer allowed to request a new occupancy inspection certificate when a family develops naturally (eg; the birth of a new child).
While most landlords are vaguely familiar with the fines a municipality may impose on them for failing to obtain a occupancy certificate, few are familiar with the far more severe consequences that such failure can result. If an occupancy certificate is required, a house rented without an occupancy certificate is an illegal contract. Therefore, in the case of the Council for Social Services Khoudary v. Salem, 260 NJS 79 (App. Div. 1992), The Court ruled that a landlord who rented without a occupancy certificate was not authorized to file a lease claim.
In essence, what Khoudary Court is saying is that it will not help homeowners to enforce illegal contracts. In the event that the tenant vacates the premises due to the lease, either for the previous months or the months that may be due under the unexpired lease, the landlord cannot file an action to collect the rent, and furthermore, cannot enforce the tenant security. deposit for this lease. Homeowners can still file a lawsuit or withhold collateral for damages, such as the destruction of an apartment. It remains uncertain whether the Court should allow the lessee to file an action for the return of all rent previously paid under the illegal contract; however, most Courts will rule that the tenant must pay a quantum merit benefit from the use of the apartment.
For nearly a decade, the Court interpreted the ruling in Khoudary to mean that failure to obtain a Certificate of Occupancy was a barrier to eviction. However, this issue has been clarified. In McQueen v. Brown and Cook, 342 NJS 120 (App. Div. 2001), The Court ruled that although failure to obtain a occupancy certificate made the contract illegal, the landlord still retained the right to evict tenants. In essence, the Court’s decision stated that the tenant should not benefit from an illegal contract, and furthermore, it was clear that leaving the tenant on an illegal lease would be against public policy.
Landlord Registration Statement
While failure to obtain a occupancy certificate is not a barrier to eviction, failure to obtain an owner registration statement (a/k/a Land Owner Identity Statement) will prevent eviction. All non-owner residences occupied in the State of New Jersey must be registered as rentals. Unlike Certificates of Occupancy, registration statements do not require inspection and do not need to be repeated upon arrival of new tenants. In most cases, a single registration statement will be effective forever.
In the event that the lease is one or two family homes, registration can be submitted to the municipal clerk. In some cases, the city government will charge a nominal fee for property registration and an additional fee upon renewal. If the property consists of three or more residences, it must be registered with the New Jersey Division of Community Affairs. The Landlord Registration Statement must include the owner’s name and their emergency contact number.
Failure to comply with registration requirements can have severe consequences for landlords. In particular, NJSA 46:8-33 states that “no judgment for ownership may be entered until there is compliance [with the Act]…” While the Statute goes on to state that the Court may continue the case (up to 90 days) until non-compliance is corrected, some landlords may be caught off guard. Some New Jersey counties even require landlords to produce proof of registration at the time of the lease hearing.
Another consequence of not obtaining a registration statement is the imposition of fines. This company has been retained to represent several landlords who have failed to obtain registration statements. As with failure to obtain a occupancy certificate, fines for failure to register can be rather hefty, and municipalities will usually impose separate penalties for each individual living in the building.
In conclusion, it is best to ensure that you obtain a Certificate of Occupancy and Owner Registration Statement before renting your property. If you forget to file either of these two documents, you may be subject to severe penalties both from the city government and in civil action with your tenant.